Obama to follow Republican plan

President
Barack Obama
gave the clearest signal yet that he may accede to Republican pressure to extend the Bush-era tax cuts for all taxpayers, including high-income earners, at the end of this year.

In his first weekly address since the Republican landslide at the midterm congressional elections last week, Mr Obama did not rule out a temporary extension of the cuts for the top 2 per cent of taxpayers.

“I recognise that both parties are going to have to work together and compromise to get something done here," Mr Obama said on Saturday.

He said he didn’t see how the country could afford the extra $US700 billion cost over the next decade, but conceded that both Republicans and Democrats would “have to work together and compromise".

The fate of the Bush tax cuts is one of the most pressing legislative issues during the so-called “lame duck" or final session of the current Congress, before the newly elected members take their seats. In the new Congress, Republicans will control the House, while Democrats now have only a slim majority in the Senate, but until the changeover in January, the Democrats continue to control Congress.

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The most widely expected form of compromise would involve a permanent extension of the tax cuts for the middle class – or families making less than $US250,000 a year – and a temporary, possibly one or two-year, extension for those earning more than that amount.

Mr Obama said both sides did not want the middle class to “wake up on January 1" with a higher tax bill and also agreed on the need to start cutting spending and addressing the deficit.

Republican Congressman
John Boehner
, who is set to become the Speaker of the House, replacing
Nancy Pelosi
, said on Friday he was hopeful the President would be willing to work with Republicans on extending all of the tax cuts once he returned from his trip to Asia.

Mr Obama is due to meet Democratic and Republican leaders on November 18 to discuss the fate of the tax cuts. The lame-duck session, which begins on November 15, is typically used to complete long-stalled bills, but can also be a time of policy gridlock.